The Impact of Business Environment Reforms on New Registrations of Limited Liability Companies

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Abstract

Panel data for 91 countries are used to study how the ease of registering a business and the magnitude of registration reforms affect new registrations of limited liability companies (LLCs). The costs, days, and procedures required to start a business are found to be important predictors of new LLC registration. Panel regressions also show important synergies in multiple reforms of two or more business environment indicators. These results are consistent with the intuition that to be effective, reforms should be sufficiently large so that the costs of registration are lower than the expected benefits. In addition, countries with relatively weaker business environments prior to reforms require relatively larger reforms to impact the number of newly registered LLCs.